Shorting Bitcoin is More Risky Than You Think

The price of Bitcoin has dropped below the US$8000 support line, which is an important technical and psychological support line - However, short selling of Bitcoin did not increase substantially back to the levels in mid-April 2018.

Traders are correct in not going into a short position right away for now. As you can see in the graph below, there was a short squeeze in mid-April 2018 when many short sellers were forced to close their short position and long BTC. If short selling of BTC returns to similar levels as in mid-April 2018, it may attract some contrarian investors who believe that the market is over-bearish. The short sellers may suffer another short squeeze again.

If you are not used to a long-short strategy it is not a good idea to go into a short position for now. A short position will be particularly risky if a few whales belong to those group of contrarian investors in which case the price of Bitcoin can shoot up in just a matter of minutes.

Source: TradingView

Legal Disclaimer:
This article is for general informational and educational purposes only. This article is not financial advice or any other kind of professional advice. This article does not constitute a solicitation of investment in any jurisdiction.